Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. He
Speaker 1: writes in the recent Insights from TCW that failing to
Speaker 1: prepare is preparing to fail. Tad Ravel is the chief
Speaker 1: investment Officer for fixed income for TCW, helping to manage
Speaker 1: more than a hundred and eighty billion dollars based in
Speaker 1: Los Angeles. Tad Ravel, thank you very much for spending
Speaker 1: time with us. What do you mean by this that
Speaker 1: failing to prepare is preparing to fail. Well, what we're
Speaker 1: speaking to is that there is an asset price cycle.
Speaker 1: There is a credit cycle. Unless this is the first
Speaker 1: one that isn't actually going to be a cycle. We
Speaker 1: should expect that the relatively placid environment of the last
Speaker 1: seven or eight years is ultimately going to have its
Speaker 1: come up in and that it's imperative that investors understand
Speaker 1: that strategies that focused on risk taking and yield emphasis
Speaker 1: will probably have very disappointing results if in fact we
Speaker 1: are in the late stages of the asset price cycle,
Speaker 1: which we do view ourselves as being. So how do
Speaker 1: you respond to people that point to the sort of
Speaker 1: I guess you would call it the disintegration of a
Speaker 1: connection between asset prices and growth in GDP. Right, Well,
Speaker 1: you know that is probably the most consequential place that
Speaker 1: people ought to be looking in terms of understanding where
Speaker 1: you are in the cycle. As we would put it,
Speaker 1: the disconnect that what you alluded to, the disconnect in
Speaker 1: which asset prices are so robust against the backdrop where
Speaker 1: GDP has been growing at very muted rates for a
Speaker 1: very long period of time, suggests that there is in
Speaker 1: fact that disconnect, as you say, between asset prices and income.
Speaker 1: If you disaggregate asset prices into their constituent pieces, obviously
Speaker 1: what you have is equities, real estate, bonds, et cetera.
Speaker 1: And when you have this large disparity between asset prices
Speaker 1: and GDP, which you're really saying is that one or
Speaker 1: all of the following are true. Pe ratios are being stretched.
Speaker 1: Cap rates in real estate are very low, or bond
Speaker 1: yields and bond spreads are also quite quite compressed. What
Speaker 1: it also means, of course, and just thinking about it
Speaker 1: in an equity formulation, if asset prices are high, if
Speaker 1: asset multiples are or pe multiples are high, ordinarily as
Speaker 1: enterprise multiples left, so do debt multiples. If debt multiples
Speaker 1: are lifting at the same time that income and GDP
Speaker 1: is muted, sooner or later, you're going to have a
Speaker 1: debt servicing problem. Well, then speak about this debt servicing
Speaker 1: problem in the context of low discount rates that were
Speaker 1: available at one time but may not be available in
Speaker 1: the future. Right so to to a very great degree,
Speaker 1: maybe this also speaks to another kind of disconnect I'll
Speaker 1: call it the central bankers disconnect. Is that traditionally you
Speaker 1: think of capitalism this way that when your labor and
Speaker 1: capital are efficiently configured in your economy, your profits are
Speaker 1: going to be growing, your wages are going to be growing,
Speaker 1: your GDP is going to be growing. That's just another
Speaker 1: way of saying that prosperity should naturally lift asset prices. Instead.
Speaker 1: What the central banks in effect have done over the
Speaker 1: course of this cycle is they short circuited the process.
Speaker 1: They forced rates lower through quantitative easing, through zero rates,
Speaker 1: negative rates in Europe and so forth, and by driving
Speaker 1: the discount rates down. Uh, the result has been a
Speaker 1: surge in asset prices. But the surgeon asset prices. It's
Speaker 1: not the case that high asset prices create the prosperity.
Speaker 1: The causation is completely reversed. And so now we believe
Speaker 1: you're in a late cycle type of environment, and ultimately
Speaker 1: you're going to have to resolve this disparity, this wedge
Speaker 1: between high asset prices and low GDP growth against the
Speaker 1: backdrop of substantially expanded leverage in the system that was
Speaker 1: incentivized by these low discount rates that you allude to. Well,
Speaker 1: does resolving this disparity? Is that a diplomatic way of
Speaker 1: saying that we are headed for some real problems? Yes,
Speaker 1: I guess you said it much more directly that there's
Speaker 1: only one of two possibilities, as as the Great Lord
Speaker 1: Kine's put it, Uh, if a trend is unsustainable, then
Speaker 1: at some point it will stop. This idea asset prices
Speaker 1: can permanently disconnect and continue it um or work in
Speaker 1: a in a dynamic that's completely disconnected from the income economy,
Speaker 1: the wealth economy. That is what I'm referencing. It's it's absurd.
Speaker 1: So either we're going to get just a massive surge
Speaker 1: in GDP growth going forward to validate and justify the
Speaker 1: increase in asset prices, or in most most probably you're
Speaker 1: going to have to see a reduction in asset prices
Speaker 1: to uh correspond back to the GDP. And the mechanism
Speaker 1: by which you get there is probably already being laid
Speaker 1: out in front of us. It's the FED tightening, it's
Speaker 1: the quantitative tightening as well as the actual rise in
Speaker 1: the overnight rate. So does that mean that tad Rivella
Speaker 1: is talking himself into a job of managing cash for
Speaker 1: a while? Well, that that's probably an unnecessary, um uh
Speaker 1: extreme step, although maintaining a proper level of liquidity is
Speaker 1: probably always a smart thing to do. But in a
Speaker 1: late cycle environment, what it really means is that you're
Speaker 1: supposed to recall what Benjamin Graham said a long time
Speaker 1: ago that bond selecting is a negative art. Uh. It
Speaker 1: may not be a negative art in the early and
Speaker 1: mid stages of the cycle, when leverage is increasing and
Speaker 1: almost everything that you do. UM, everything that you do
Speaker 1: from a risk seeking point of view tends to do
Speaker 1: rather well in the late stages of the cycle. You
Speaker 1: have to be very careful about not selecting assets that
Speaker 1: we would deem breakable in the sense that they're going
Speaker 1: to give you a permanent impairment of principle. And so
Speaker 1: that means that when you survey your allocations to things
Speaker 1: like high yield and in some of the more leveraged
Speaker 1: area of the corporate market, is be careful. There are
Speaker 1: ways to continue to capture yield premium even in a
Speaker 1: asset price come up and bear market. In in in
Speaker 1: risk there are plenty of things that work out, but
Speaker 1: there's a lot of things that may be very disappointing
Speaker 1: in terms of where where they end up. Where do
Speaker 1: you believe you'd see the first indications of these problems.
Speaker 1: Would it be and let's say the leverage loan market,
Speaker 1: would it be in high yield debt? Well, the places
Speaker 1: that are probably most vulnerable UM would be in the
Speaker 1: part of the high yield market, particularly that part of
Speaker 1: the market that has been so overgrown with covenant light
Speaker 1: debt issuance. And although covenant light sounds like a sort
Speaker 1: of a technical, almost obscure term. What it really comes
Speaker 1: down to is we're always supposed to remember that a
Speaker 1: corporate management has a fiducial obligation to its shareholders, but
Speaker 1: a contractual one to its bondholders. So what that means
Speaker 1: is that a business can have uh good potential as
Speaker 1: a business, but without a properly constructed set of covenants
Speaker 1: for the bondholder, it's also possible for management to essentially
Speaker 1: uh spin those assets off the shareholders, pay sell assets,
Speaker 1: and pay special dividends, and essentially leave the bond holder
Speaker 1: holding the bag. So the fact that covenant light issuance
Speaker 1: is essentially off the charts, it's much greater than we've
Speaker 1: ever ever seen it. It's a very um imprudent form
Speaker 1: of lending. So you should expect that when the Fed
Speaker 1: raises rates, it also strengthens the dollar and you start
Speaker 1: to see cracks develop in parts of the emerging market.
Speaker 1: We've seen that just in the last week with Argentina
Speaker 1: and to a slightly lesser degree, Turkey and maybe Indonesia
Speaker 1: as well. Thank you very much, tad Rivell joining us
Speaker 1: as the Chief Investment Officer for fixed Income at the
Speaker 1: tc W group helping to manage more than a hundred
Speaker 1: and eighty billion dollars global value. What is a global
Speaker 1: value investing perspective? Here to help us understand this is
Speaker 1: Thomas Russo, managing member of a gardener Russo and Gardener,
Speaker 1: helping to manage more than ten billion dollars of customer assets.
Speaker 1: Based in Lancaster, Pennsylvania. He joins us here in our
Speaker 1: eleven three oh studios. Tom, it is a pleasure to
Speaker 1: see you. Thank you very much for coming in. I
Speaker 1: want to jump right into it and specifically start about
Speaker 1: talking about tobacco stocks. Because tobacco stocks, let's leave aside
Speaker 1: for the moment. Uh, they're the products in terms of
Speaker 1: whether you are for or again smoking and the health concerns.
Speaker 1: Many people have invested in these stocks because they have
Speaker 1: looked forward to what are many consider rich dividends. Yes,
Speaker 1: do you believe that that's still a valid thesis? Well,
Speaker 1: it certainly has been over the past four or five
Speaker 1: or six years as rates short end and the curve
Speaker 1: have been so low, and so people have sort of
Speaker 1: been pushed into equities and search for yield, and they've
Speaker 1: had the highest the highest levels of yield. Um. Uh,
Speaker 1: and it's in large measure because up until recently they've
Speaker 1: they've lacked the ability to reinvest a lot of money
Speaker 1: in the business. UM historically, um UH, and and the
Speaker 1: dividend yields five percent plus for um Fillmore's International and
Speaker 1: roughly the same for all three have attractive capital historically.
Speaker 1: So do you think that they are still attractive for
Speaker 1: people looking for dividends? No, I think the I think
Speaker 1: the search for yield actually has has already sort of
Speaker 1: begun to reverse because the two year treasury yields close
Speaker 1: to two point seven percent today, and that's fully more
Speaker 1: than many public companies have as as their dividends, and
Speaker 1: so it's adequate. It's adequate to keep people away from equities.
Speaker 1: They don't have to chase after equities just to get yield.
Speaker 1: Two point whatever it is is close enough. The issues
Speaker 1: with them, the three areas that you site tobacco and
Speaker 1: beer and and UH and banking, is that, interestingly all
Speaker 1: three of them stumble and and struggle today because they're
Speaker 1: going through a remarkable period of transition. Those are traditional
Speaker 1: old businesses. You can't imagine anything quite as long standing
Speaker 1: as tobacco, banking, and and UH and beer. Um, But
Speaker 1: each of the business is that we're involved with there
Speaker 1: have new elements that make the future seem more cloudy
Speaker 1: than than the past. Okay, but just final question on
Speaker 1: tobacco stocks and then what we can go on and
Speaker 1: talk about a by shares of Philip Mooreton International are
Speaker 1: down by more than a fifth. Yes, so far this year,
Speaker 1: as you say, they currently pay a five percent did
Speaker 1: end um? Is this a stock in your opinion whose
Speaker 1: time has come and gone. No, No, it's a position
Speaker 1: still in my portfolios. Um, it's a it's a stock
Speaker 1: which evidence is the expression at this moment that no
Speaker 1: good deed in life goes unpunished. It's Philip Morris says
Speaker 1: alone in the industry, over the past five years, directed
Speaker 1: over two and a half billion dollars of shareholder money
Speaker 1: to develop a reduced risk product, a cigarette substitute that
Speaker 1: satisfies adult consumers who wish to quit, which are effectively
Speaker 1: half the community of smokers in the world over, probably
Speaker 1: a hundred and fifty million people would love to quit,
Speaker 1: and yet they haven't had something they worked. Philip Morris,
Speaker 1: after having spent invested two and a half billion dollars,
Speaker 1: has a product that works, and in fact, in Japan
Speaker 1: and other markets where it's rolled out, they now have
Speaker 1: close to market share themselves. Uh. In In this in
Speaker 1: what was the tobacco industry is now split with combustible
Speaker 1: cigarettes and the product that Philip Morris invented called the icos,
Speaker 1: which is a non combustible cigarette, and everything's moving along
Speaker 1: swell up until a couple of weeks ago they had
Speaker 1: a stumble in the in the rollout of of a
Speaker 1: new device that's attached to this product, and that caused
Speaker 1: some investor concerned. There was a slowdown in the cigarettes
Speaker 1: that go with that product, and the market became a
Speaker 1: bit uh disenchanted with the near term prospers. The long
Speaker 1: term process of completely unaffected by this UM as far
Speaker 1: as I can tell. And then on top of it,
Speaker 1: it's it's a regulatory thing. The US FDA has resisted
Speaker 1: allowing this product into the market, despite the fact that
Speaker 1: it has helped nearly six million smokers around the world
Speaker 1: in the last two years alone quit forever cigarettes and
Speaker 1: so UM we believe that that relief from the FDA
Speaker 1: will have to come because the product being adopted by
Speaker 1: millions of people overseas, leaves of the US seeming a
Speaker 1: bit of isolationists as it relates to a product that
Speaker 1: has effectively helped people for the first time ever quit Now,
Speaker 1: that's one thing then, and I think at five five
Speaker 1: percent yields at thirteen times that income in this marketplace.
Speaker 1: The investments are in Altria in Philip Morris are quite
Speaker 1: reasonably priced, especially as I do believe that the product
Speaker 1: that both of them will share and we'll finally get
Speaker 1: approved by the U s f D. A. Thank you
Speaker 1: very much, Tom Russo. I look forward to having you
Speaker 1: in the future. You got to talk more about your
Speaker 1: value strategy and get your insight into what's going on
Speaker 1: in the beer industry because, as you say, going through
Speaker 1: lots of changes. Tom Russo is managing member of Gardner
Speaker 1: Russo and Gardner, helping to manage more than ten billion
Speaker 1: dollars based in Lancaster, Pennsylvania, joining us here in our
Speaker 1: eleven three oh studios. Well, if you've been scouring the
Speaker 1: quarterly reports of companies such as Netflix, Microsoft, or Google's
Speaker 1: Alphabet or even Oracle looking for how much cash they
Speaker 1: have held overseas, good luck you won't find it. Brandon
Speaker 1: Couch Codin is a managing editor for Bloomberg News, and
Speaker 1: he joins us now to explain why, all right, Brandon,
Speaker 1: why aren't companies reporting how much money they have held overseas? Yeah,
Speaker 1: I mean, the simple answer is they don't have to. Um.
Speaker 1: The the more complicated one is basically, um, with the
Speaker 1: tax law changes, Um, every company how to pay these
Speaker 1: this mandatorily? How to pay this tax? Already they can
Speaker 1: space it out over eight years, but they have to
Speaker 1: pay this tax on their fore and holdings. So cash
Speaker 1: anywhere in the world is basically fungible. Now. Yeah, but
Speaker 1: why wouldn't they want to report that they had, let's say,
Speaker 1: brought the money back to the United States, if indeed
Speaker 1: they did so. And that's the question that tax experts
Speaker 1: we talked to are asking. Um, they're looking for, you know,
Speaker 1: changes in disclosure right now because they haven't gotten a
Speaker 1: lot of guidance from the I R S. All Right,
Speaker 1: So if the company doesn't bring back the cash from
Speaker 1: the United States, there's no way to know this now,
Speaker 1: at least not from their quarterly reports. We might see it,
Speaker 1: um through other filings, some of them are actually disclosing.
Speaker 1: I mean, we have an example in there from Google
Speaker 1: I believe that they told us how much UM tax
Speaker 1: they paid, so from there you can kind of back
Speaker 1: end it and get a sense of how much they
Speaker 1: brought back. But it's up to them, I mean, otherwise
Speaker 1: we're not going to know. And what about other companies.
Speaker 1: I mean I mentioned Microsoft, Netflix, Alphabet the parent company
Speaker 1: of Google, as well as Oracle and Apple. They don't
Speaker 1: report this and in some cases I should just mention
Speaker 1: that it isn't something that's just happened, correct exactly. So
Speaker 1: Apple stopped last year at the end of their I
Speaker 1: guess their fiscal first quarter whatever whatever it was. They're
Speaker 1: back in October UM and then you know, the same thing.
Speaker 1: I think Cisco stopped a little bit earlier. Otherwise we're
Speaker 1: seeing them stop at this first quarter recording after tax
Speaker 1: law went into effect. And what about other companies? Are
Speaker 1: other companies like Coca Cola, for example, are they still
Speaker 1: reporting how much money they have? That's that's sort of
Speaker 1: the interesting part to us right now is seeing who's
Speaker 1: reporting and who is and so Coke and Pepsi both are,
Speaker 1: g Caterpillar both are um. Facebook is some of the
Speaker 1: interesting things to get to see now is someone like
Speaker 1: Facebook there you actually have more cash overseas now than
Speaker 1: they did before, so it's not quite having the effect
Speaker 1: we thought it would. The question is whether how much
Speaker 1: it is just how much it matters now the new
Speaker 1: rule is at a one time rate of what like
Speaker 1: fifteen and a half percent for the cash and eight
Speaker 1: percent for non cash or illiquid assets exactly, And and
Speaker 1: they have that's on what they were holding. Um. They
Speaker 1: have eight years to pay that, though they can space
Speaker 1: it out, so there's sort of that um opacity right
Speaker 1: now in terms of when they're paying it. And that's
Speaker 1: something we're all gonna care about because it's going to
Speaker 1: have an impact. So this would then make the actual
Speaker 1: cash amount that is listed in the quarterly report a
Speaker 1: total obviously for the entire company, and it would be
Speaker 1: treated the same as if it was in the United States. Yeah, exactly,
Speaker 1: So what they held overseas, that's what's going to get
Speaker 1: taxed at those rates for this one time sort of
Speaker 1: um you know, repatriation holiday, we want to call it that, um. Otherwise,
Speaker 1: now it's all being treated the same. The questions are
Speaker 1: becoming now, um around if if we're going to see,
Speaker 1: you know, what the global minimum rates going to be
Speaker 1: and if this is a permanent situation, or if companies
Speaker 1: are keeping it overseas just in case something changes, and
Speaker 1: and that there might be an advantage down the road
Speaker 1: because previously they had to pay what a thirty five
Speaker 1: percent tax if they wanted to bring the money back
Speaker 1: into the United exactly. And so that was always the
Speaker 1: rationale for why I was saying, quote locked overseas um
Speaker 1: you know, like we see we see it in the article.
Speaker 1: We have tax experts that are that are saying, you know, look,
Speaker 1: we tried this before in two thousand four. We didn't
Speaker 1: see a ton come back. You know, we're doing it now,
Speaker 1: expected to be sort of tactical, and don't expect this
Speaker 1: all to all of a sudden, you know, come on
Speaker 1: to us accounts. And one of the reasons why investors
Speaker 1: would look at the cash position of a company is
Speaker 1: that when you do a total valuation of the company's stock,
Speaker 1: you want to back out, or at least you want
Speaker 1: to make note of how much cash they have on
Speaker 1: their books, because that would then be something you could
Speaker 1: deduct from the actual share price. Yeah, of course, all right,
Speaker 1: And any word from the Internal Revenue Service as to
Speaker 1: whether they're going to make this kind of filing, uh,
Speaker 1: you know, mandatory in the future in order to sort
Speaker 1: of see or check to see whether the law itself
Speaker 1: was was effective. Everyone we've talked to is said that
Speaker 1: there's you know, the problem right now is the lack
Speaker 1: of guidance from the I R S. So there hasn't
Speaker 1: been anything to that effect yet. All right, well, thanks
Speaker 1: for the guidance. Appreciate it. Brandon Couch Cotton is managing
Speaker 1: editor for a Bloomberg News on the story that the Apple,
Speaker 1: along with a variety of other companies such as Netflix, Microsoft,
Speaker 1: as well as Oracle, uh not reporting how much money
Speaker 1: or cash they have on their books outside the United States,
Speaker 1: go public or get sold. Well, there may be an
Speaker 1: advantage to being acquired. Sandy Miller is the general partner
Speaker 1: at Institutional Venture Partners i v P, based in San Francisco,
Speaker 1: and Sandy joins us now to explain what's going on
Speaker 1: in the world of technology and initial public offerings and
Speaker 1: mergers and acquisitions. Sandy, thank you very much for being
Speaker 1: with us. You know, one of the things and preparing
Speaker 1: for this, I was taking a look at Snap, which
Speaker 1: was a headline grabbing initial public offering. It came public
Speaker 1: at seventeen. It currently trades around ten dollars a share.
Speaker 1: UH that's a decline of a little bit more than
Speaker 1: forty percent. On the other hand, mule Soft was acquired
Speaker 1: by Salesforce dot Com in March of this year for
Speaker 1: a price of five point six billion dollars. And also
Speaker 1: looking at the number of technology initial public offerings, I
Speaker 1: think they are about six that are currently trading year
Speaker 1: to date. Give us your overview of what is going
Speaker 1: on in the world of funding for a large technology
Speaker 1: companies such as the Sandy sure Well's first. It's a
Speaker 1: very healthy environment. The i p O s for for you.
Speaker 1: I'm looking here at US technology companies have really been
Speaker 1: working well. The last three that have gone Carbon Black
Speaker 1: Smartsheet Docum sign all raised the range from the initial
Speaker 1: filing range, priced adder above the range and traded up
Speaker 1: an average of Actually the nets consistent. It's actually been
Speaker 1: fifteen US tech i p O so far this year,
Speaker 1: which is running well ahead of and they're up an
Speaker 1: average of the most prominent one. The biggest name of
Speaker 1: the group was Dropbox. UH was an i VP portfolio
Speaker 1: company which has traded up over so deals are working
Speaker 1: Um it's not really that a surprise because there's a
Speaker 1: there's great companies as a backlog of great companies that
Speaker 1: are expecting to see more I p O s. UM.
Speaker 1: They're benefiting from obviously deals perform and money managers are
Speaker 1: looking to add to the these companies to their portfolio
Speaker 1: to you know, as a form of alpha. And they're
Speaker 1: benefiting from a favorable regulatory environment because the Jobs Act,
Speaker 1: which wanted to affect several years ago, has been expanded
Speaker 1: to include larger tech companies. Uh and some of these
Speaker 1: new I p O s are pretty mature companies that
Speaker 1: that didn't meet the standards of the Emerging market UM
Speaker 1: qualifications for the job back but now they too. All
Speaker 1: the all the companies, not just tech of course, but
Speaker 1: all the companies can can use the confidential filing and
Speaker 1: the test the waters features of the Jobs Act, which
Speaker 1: has been a great boon to the I p O
Speaker 1: market because it gives CEO is much more confidence that
Speaker 1: if they go through the process that it's going to
Speaker 1: be successful. UM. So I think it's a very healthy
Speaker 1: environment for ips. But one of the things that I
Speaker 1: wanted to mention really was the M and A market.
Speaker 1: You mentioned the mule Soft acquisition happened to be one
Speaker 1: of our portfolio companies as well, the very very successful
Speaker 1: after going after a successful IPO. But many cases, companies
Speaker 1: are going to be acquired prior to going I P O.
Speaker 1: And this isn't new. But I think, you know, people
Speaker 1: sometimes think the M and A market people buy when
Speaker 1: things or prices are low or whatever, that it's going
Speaker 1: to be counter cyclical to the I p O market,
Speaker 1: But just isn't true. It's been consistently the case that
Speaker 1: I p O s and M and A, certainly in
Speaker 1: the tech sector cycled together. Well, what ap app Dynamics,
Speaker 1: which was purchased by Cisco. Would that be an example,
Speaker 1: it's a particularly vivid example. Happened to be another IPP
Speaker 1: portfolio company, the very successful one. They got to the
Speaker 1: they took it to the brink. They were required really
Speaker 1: almost at the eleventh hour and fifty nine minute by Cisco,
Speaker 1: even though they had market the road show was going
Speaker 1: to be clearly successful, very well received offering, but Cisco
Speaker 1: just made a bid that you know, you just couldn't
Speaker 1: say no to. I guess the but we'll see others.
Speaker 1: There are you know, two I p O s I'm
Speaker 1: sorry to M and A transactions this past week both
Speaker 1: our companies that could have gone public and UH recruit
Speaker 1: bought glass Door, the online review for employees company, for
Speaker 1: one point two billion, and Walmart brought flip Guard, the
Speaker 1: big Indian e commerce giant, for well, they paid sixteen
Speaker 1: billion for seventy seven percent of the company that you
Speaker 1: applies to twenty one billion dollar company value. Those are
Speaker 1: two companies could have gone public but are being acquired instead.
Speaker 1: And we'll see we'll see more of that once companies
Speaker 1: get on either on file or gearing up publicly on file,
Speaker 1: or are preparing for an IPO and have made a
Speaker 1: confidential filing. And sometimes companies announced that they've made a
Speaker 1: confidential filing. You're actually allowed to do that. Um, the
Speaker 1: they become it kind of, it becomes a cattle for
Speaker 1: the big tech companies that probably have been tracking them
Speaker 1: for a while to move in and make an acquisition
Speaker 1: if it makes strategic sense for them. Do you see
Speaker 1: more untraditional types of money raising activity? And I'm thinking
Speaker 1: for example of Spotify, which went public but not in
Speaker 1: a traditional way. Yeah, of course it wasn't money raising
Speaker 1: for Spotify because they did a so called direct listing. Uh,
Speaker 1: they didn't need the money, they didn't need the visibility
Speaker 1: of an IPO road show because the company was so
Speaker 1: well known has been you know, it's an eleven year
Speaker 1: old company that's very prominent, very certainly very extensive, you know,
Speaker 1: consumer base and the so they did a direct listing.
Speaker 1: I don't think we'll see a lot of it, but
Speaker 1: I'm glad to see it because I'm all for alternatives
Speaker 1: for companies, and we just see the Hong Kong market
Speaker 1: is getting more lively, so obviously that's going to be
Speaker 1: more for the Chinese companies. But shallow be going public
Speaker 1: plans in UM in Hong Kong. So I think it's
Speaker 1: good to have alternatives. But the direct listing doesn't raise
Speaker 1: any money UM, but it does get you, get you public.
Speaker 1: I don't think it's that biggest savings. You know. The
Speaker 1: reason why people want to do it is there's jealousy
Speaker 1: over who gets the gains from the first day pop
Speaker 1: of an I p O. That's really what it's all about.
Speaker 1: They're not so much looking to save the underwriting fees.
Speaker 1: They're looking to redirect the pop of the first day
Speaker 1: to their own share existing shareholders rather than a new
Speaker 1: set of hand picked investors from an investment bank, you know,
Speaker 1: occurrying favor with their best clients. Want you to get
Speaker 1: specific if you can right now, because I know that
Speaker 1: you have a lot of well you've got a lot
Speaker 1: of history in the in the in the industry, but
Speaker 1: telematics and and the logistics industry, and what if you
Speaker 1: could just comment on what you see, what you see happening. Sure,
Speaker 1: well it's an area that I've personally been pretty involved in.
Speaker 1: We're back to uh, we're back three companies so far,
Speaker 1: one right, Fleet Maddox was one of them. Yes, I
Speaker 1: was on the board of Fleet Maddics. We've backed at
Speaker 1: road Um, which you know was acquired very very successfully,
Speaker 1: the Fleet Maddics which went public and then was later
Speaker 1: required and most recently a company called keep truck and
Speaker 1: based here in San Francisco, which has sort of turned
Speaker 1: the business on its head. And it's a it's a
Speaker 1: rather than a system that's kind of imposed by the
Speaker 1: fleet owner, is actually a telematic system and uh, combined
Speaker 1: with a lot of other functionality that the truckers that
Speaker 1: have adopted themselves. And then you know, much like most
Speaker 1: technology today, you know, it starts with the users, then
Speaker 1: the company picks up on it. So it's it's gotten
Speaker 1: very very broad positive acceptance from the actual truck driver community.
Speaker 1: I think it's an area really right. You know, this
Speaker 1: is a massive amount of our Our whole industry moves
Speaker 1: by truck uh. It's a very old fashioned industry. The
Speaker 1: information and available is remarkably limited historically, and it's really
Speaker 1: right for you know, technology improvements and people like Keep
Speaker 1: Talking and others are providing that. Thanks very much for
Speaker 1: being with us. Sandy Miller's general partner for Institutional Venture
Speaker 1: Partners i v P, based in San Francisco, and you
Speaker 1: can follow them at i v P on Twitter. Thanks
Speaker 1: for listening to the Bloomberg P and L podcast. You
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
Speaker 1: It's one before the podcast. You can always catch us
Speaker 1: worldwide on Bloomberg Radio.